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$9.4 Million Penalty for Unlicensed Exports; Remedial Actions Help Earn Mitigation

Wednesday, July 06, 2016
Sandler, Travis & Rosenberg Trade Report

A multinational corporation has agreed to pay a total of $9.4 million in penalties to settle charges that it violated U.S. economic sanctions and export controls by engaging in the sale and exportation of medical end-use surgical and pharmaceutical products from the U.S. to distributors in Iran and Sudan without the required authorization.

The Office of Foreign Assets Control states that the statutory maximum civil monetary penalty amount for the sanctions violations was $138,982,584 and that the base penalty amount was $16,927,000. While the settlement amount for the OFAC penalty is $7.62 million, OFAC states that the company’s obligation to pay this amount will be satisfied by its payment of an $8.1 million penalty to the Bureau of Industry and Security and a $1.32 million payment to the Treasury Department. The company’s failure to pay these amounts in a full and timely manner may result in the suspension of its export privileges for one year.

OFAC states that the company did not make a voluntary self-disclosure but that the penalty reflects its consideration of the following facts and circumstances.

- aggravating factors: the company demonstrated reckless disregard for U.S. sanctions requirements by having virtually no compliance program, despite significant business involving the exportation of goods from the U.S. to Iran and Sudan, and by failing to take adequate steps to investigate a third-party freight forwarder’s cessation of shipments to Iran on its behalf; the company and its then-senior management knew of the conduct giving rise to the apparent violations; and the company is a sophisticated multinational corporation with extensive experience in international trade

- mitigating factors: harm to U.S. sanctions program objectives was limited because the exports involved medical end-use products that were licensable under the Trade Sanctions Reform and Export Enhancement Act of 2000 and in fact had been previously and subsequently licensed by OFAC for the company; the company has no prior OFAC sanctions history, including no penalty notice or finding of violation in the five years preceding the date of the earliest transaction giving rise to the apparent violations, making it eligible for “first violation” mitigation of up to 25 percent; the company took remedial action by ceasing the unlicensed exports to sanctioned countries, initiating an internal investigation of the apparent violations, and instituting a robust compliance program that now includes updated or newly-created corporate export and trade sanctions compliance documents, enhanced trade compliance training and enhanced compliance procedures for requesting OFAC licenses; and the company substantially cooperated with OFAC’s investigation, including by providing detailed and well-organized information and entering into several statute of limitations tolling agreements

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